(English) The Payment of social capital quota of a limited company by property

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These article aims to show briefly some importante points about the payment of social capital quota of a limited company by property.

Key-Words: Limited Company. Social Capital. Subscription. Payment of social capital quota. ITBI. (Tax transfer of immovable homes)

According to Brazilian law, a company born with the record of their Articles of Association or Statute  in the “Junta Comercial[2]” in case of Corporate Entrepreneurs or “Cartório de Registro de Pessoas Jurídicas[3]“, in case of Single Company, which are the public institutions Competent to this end.

Regarding the exercise of their activity, when occurs the formation of their capital, the Corporation born as an economic unit organized.

Social Capital is in fact, nothing more than the resources undertaken by partners of the Company for the establishment / creation of society. This mean that to initiate their activities, the Company, need capital (money or patrimony) that are provided by those who had constituted the society (the partners).

In this sense, the social capital is the first patrimony that composes a Company.

Thereby, the partners should contribute to capital social formation of Limited Company that will be share in quotas, which means the fraction, parcel or portion of contribution of each partner.

It is noted that the Brazilian Civil Code authorizes the division of social capital into several quotas, equal or not, allowing each partner, the ownership of one or more quotas.

It is also important to note that quota is just a reference of the share social capital division, therefore, there is no documentary representation itself, neither it isn´t a negotiable debt claim instrument; differs, therefore, the stocks of joint-stock Company. The way that each partner has to demonstrate and prove yours ownership and amount of shares is through the contractual instrument (Articles of Association / Statute) duly registered at competent organ.

Thus, in order to assign rights and obligations of each partner, the capital value must be specified in the Articles of Association / Statute, stipulating the quotas part of each partner, as well as when and how it will be paid.

It is importante to poin that Brazilian law does not stipulate a maximum or minimum value for the social capital, staying at the discretion of the partners, according to the social undertaking, the stipulation of their value, as well as the shape of your payment (cash or goods).

Subscription and Social Capital Payment

The subscription is a preliminary act information which will to point who are the partners that will compose the Corporate and how each one will be pay their quota part.

On the other hand, the social capital payment is actually the payment of the social quotas subscribed, thus, is to carry out the social capital.

This realization is made ​​by the partners and may be in cash, goods, property, securities, and also as patent rights or trademark certificate, provided that previously agreed between the other partners, the payment could be on sight or divided in installments.

Ways of social capital payment

As stated before, the social capital payment may be done by cash or goods/property.

The payment by cash is quite a simple way because, the partner just transfers the amount to the society cashier upon receipt.

In case of payment done by a motor vehicle is required to transfer the ownership of the goods, by Departamento Estadual de Trânsito[4] – DETRAN and the issuance of a new certificate of title on behalf of the company.

The payment through credit instruments should be formalized through the legitimate instrument of rights transfer.

Other securities, such as patent and trademark registration certificate, are also transferred by an legitimate instrument of rights transfer and shall be endorsed at Brazilian National Institute of Industrial Property.

The payment through property, subject of this article, operates with the simple “tradição” (actual issuance/delivery) to compose the company’s equity.

This means that it is not necessary public deed to make the property incorporation at company´s social capital. Such act can be formalized by Company´s Articles of Association / Statute or by their amendment, duly signed by the partners, provided that all required elements are included, such as: description, identification, area, registration data and the ownership of property, object of the incorporation, spouse’s consent if the partner is married, in other words, the same informations as would be required for a public deed.

In the absence of any of these requirements, such document can not be registered, in accordance to article nº 35, section VII, paragraphs ‘a’ and ‘b’, of 8.934/94 Brazilian Law.

Thus, after Articles of Association / Statute or their ammendment registration approval by “Junta Comercial” or by “Cartório de Registro de Pessoas Jurídicas”, they will be avaiable to be endorsed at “Cartório de Registro de Imóveis” competente, in accordance with article nº. 64 of  8.934/94 and article nº. 1.245 of  Brazilian Civil Code, as well article 167 of nº 6.015/73 Brazilian Law.

Another important point to observe is that the organ of “properties registry” or  “Cartório de Registro de Imóveis”, under its jurisdiction, can require other relevant documents for these transaction, such as receipt of payment or proof immunity certificate of ITBI[5].

ITBI Payment Needs

Generally, the payment of the social capital in a Limited Company, is immune of  ITBI – Tax Transfer of Real Estate.

Such immunity it is provided by Brazilian Federal Constitution, article 156, §2º, I:

“Art 156.

(…)

• 2. The tax established in item II:

I – not levied on the transfer of goods or rights incorporated into the assets of a corporation in carrying out capital, nor on the transfer of goods or rights arising from consolidation, merger, division or dissolution of a corporation unless, in such cases, the predominant activity of the purchaser is the purchase and sale of such property or rights, or lease of real property leases. ”

Thus, the hypothesis of non-levy or non-assessment envisaged by the Brazilian Constitution withdraw the municipality taxing power to institute the ITBI on the foregoing hypothesis, importing a limitation on the constitutional power to tax.

In the same way, aimed at regulating immunity, we have Article 36, paragraph I, of the Brazilian Tax Code which provides as follows:

“Art 36. Except as provided in the following article, the tax is not levied on the transfer of goods or rights referred to in the previous article:

I – when carried to its incorporation to the assets of a corporation in payment of subscribed capital in it. ”

However, it is important to emphasize that the immunity demonstrated here is not an absolute rule, we have the exception provided for Article 37 of the Brazilian Tax Code, in which case the municipality fundraiser may institute and charge ITBI “when the entity acquiring the property has as preponderant activity sale or rent of real property or the assignment of rights relating to its acquisition. ”

The concept of real estate activity is primarily defined in paragraph one of Article 37 quoted above:

Article 37.

(…)

• 1. It is considered the main activity that characterized this article when more than 50% (fifty percent) of the operating revenue of the acquiringCorporation, within two (2) years before and two (2) years following the acquisition, accrue from transactions mentioned in this article. ”

Accordingly, we conclude that the municipal tax will only be applicable (exception in cases of immunity) when more than 50% (fifty percent) of the operating revenue of the acquiring corporation within two (2) years beforeand also cumulatively, in the 2 (two) years following the acquisition, accrue from real estate transactions.

Thus, despite the immunity is the rule, before beginning the procedures to pay the social capital of a society through real estate, it is important to check whether or not there will be the incidence of ITBI.

Conclusion

Can a partner in a Limited Partnership to pay the social capital through real estate, however, is of paramount importance to note that he will avouch for the legality and veracity of the value assigned to the assets and credits, extending the scope of criminal liability (fraud , for instance).

Therefore, the partner “quotista” is obligated and responsible for the transfer of the assets or property to society, in the way stipulated in the Articles of Association/Statute, under penalty to respond of damages, as well as responsible for latent defects. In short, the obligations are identical to the seller in a “purchase and sale agreement of immovable property”.

At first, the real property to be paid depend on prior assessment to determination of the other partners, however, if there is unanimous consent to receive them to integrate the assets of the Limited Company is not required prior review, on this account the agreement of all partners is equivalent to the evaluation .

For the payment of the social capital through property, it is needful register the Articles of Association/Statute or its ammendment in the “Cartório de Registro de Imóveis”, in the same words, at municipal organ responsable for registry of property, being the oficial of that competent organ can request additional documents that becomes necessary .

Finally, as a rule, there is no incidence of ITBI, however, if set up the existence of predominant activity as sale, rent or assignment of rights to purchase of real property,  the partner interested in pay up social capital through property should make payment of such tax.

Being required clarification or assistance on issues outlined in this article, the Consulting Team of Chenut Santiago Oliveira Law Firm is available (www.chenut.online).

¹ Lawyer, specializing in Business Law, Consultant in obligational Law, Real Estate and Corporate Law. Team Member of Immigration of “Chenut Oliveira Santiago Sociedade de Advogados” – Law Firm.

[2] The “Junta Comercial” corresponds to “Companies House” at UK which is an Executive Agency where where all Limited Companies in the UK must be registered..

[3] The “Cartório de Registro de Pessoas Jurídicas” it is another public brazilian institution that is competent to “Registry of Legal Entities” that have not been constituted in the form of “Corporate Entrepreneurs”.

[4] State Traffic Department

[5] ITBI it´s a kind of Brazilian tax and means “Real Estate Transfer Tax”.

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